Ford makes play for younger drivers with Zipcar
DETROIT - By supplying up to 1,000 cars to Zipcar Inc., whose members rent cars on an hourly basis, Ford Motor Co. is making a move to reach a new and growing generation of younger buyers who may not want to buy a car — at least not now.
"The love affair with the automobile that drove generations to buy a car as soon as they turned 16 is just not showing up with this millennial generation," said Robert Parker, Ford marketing manager.
While many may remember a day when teenagers couldn't wait to get their license, the percentage of 16-year-olds with a driver's license has steadily declined in the past two decades.
Ford is now the only Detroit automaker to partner with Zipcar.
Two years ago Executive Chairman Bill Ford, who pushed the Zipcar deal, said, "the future of transportation will be a blend of things like Zipcar, public transportation and private car ownership."
With this deal, Ford vehicles such as the Focus and Escape will eventually make up about 10 percent of Zipcar's fleet.
With 605,000 members, the 24/7 hourly rental service is on more than 250 college campuses. Zipcar lost $11.7 million in the first half of the year, but its sales grew 40 percent to $110.7 million from a year earlier.
Expanding its relationship with Zipcar allows Ford to reach potential younger buyers and bet that a still-unprofitable upstart in the growing car-sharing market can fend off larger and much better-funded rivals.
The two-year partnership gives Ford access to more than 250 college campuses and younger urban dwellers who only want cars when they need them. Zipcar's largest markets are New York, Chicago, San Francisco and Washington, D.C., areas where Asian and European automakers have larger markets.
There is growing evidence that younger consumers, especially those in college towns and large cities, are delaying purchases of new vehicles.
"Twenty-somethings are growing up in a period of considerable economic insecurity. They're seeing their parents holding on to vehicles longer than they used to and facing challenges to finding jobs themselves," said Jesse Toprak, an analyst with TrueCar.com.
Americans scrapped 2.1 million more vehicles than they replaced since 2008, R.L. Polk reported earlier this year. Such data is leading industry leaders to wonder if American consumers will buy 16 million new cars and trucks a year — the average annual U.S. industry volume in the decade leading up to the 2008 financial crisis — in the foreseeable future.
While General Motors and Chrysler sell cars that may be offered through Connect by Hertz, Enterprise's WeCar or other car-sharing ventures launched by traditional rental companies, Ford is betting on Zipcar, partly because it was first and partly because it has created a culture — such as calling its members "Zipsters" — that Ford regards as receptive to both the cars and in-vehicle communications technology such as Sync.
Among the schools where Zipcar has vehicles are Harvard University, Yale University, the Massachusetts Institute of Technology, Stanford University, the University of Southern California, the University of California-Berkeley and George Washington University.
"Zipcar has been around for more than a decade. They are on more than 250 college campuses, and these include very influential schools," said Robert Parker, Ford group marketing manager. "These are the next generation of leaders."
Parker said the vast majority of the cars Ford sells to Zipcar over the next two years will be Focuses, although it could include additional Escapes, which Ford has supplied to the car-sharing company for the last few years. He expects Zipsters will log about 1 million hours behind the wheel of the Focuses over the next two years.
Zipcar accounts for 50 percent of the car-sharing market in the U.S. and Canada, but Hertz and Avis Budget are coming on strong. Ford's long relationships with those customers provides a hedge if the Zipcar deal doesn't pan out.
Most services involve a membership fee and an hourly rate. Some insurance is provided, but deductibles vary among competitors. Zipcar pays for gas, but members are expected to fill up when they return the vehicles.
Ford and Zipcar will offer $10 off the annual membership fee ($35 or $25 depending on location) for the first 100,000 new university students members who sign up, plus $1 off the hourly rate for the first 1 million hours of use on any of the new Ford vehicles at select colleges and universities.
Zipcar rates can range from about $7.50 an hour from Monday through Thursday and $14 an hour from Friday through Sunday, while Hertz and Avis are offering more discounted prices in many markets.